wins or loses their bet, Kalshi’s sports-betting contracts have no direct financial consequences for the purchaser. To constitute a swap, the underlying event itself “must be inherently associated with a potential financial consequence.” Hendrick , 2025 WL 3286282, at *7. “[E]xternalities like whether people bet on the event or the contingency, or whether the event’s occurrence or nonoccurrence causes downstream financial consequences, are not sufficient.” Id. Sports-betting contracts do not satisfy this requirement and therefore do not qualify as swaps. 2. Congress did not manifest clear intent to repeal IGRA or to make the CFTC the nation’s sole gaming regulator. Congress did not repeal IGRA and grant the CFTC the exclusive authority to regulate nationwide sports betting. In fact, Congress expressed the opposite intent and went out of its way to prevent event-contract markets from being used as a means to conduct a gambling business. See 156 Cong. Rec. S5906-07 (daily ed. Jul. 15, 2010) (colloquy between Sens. Feinstein and Lincoln). To that end, Congress enacted the “Special rule” authorizing the CFTC to “determine that such agreements, contracts, or transactions are contrary to the public interest” and to disallow any “gaming” activity on DCMs at all. See 7 U.S.C. § 7a-2(c)(5)(C)(i)–(ii). The CFTC acted consistently with Congress’s intent by promulgating its blanket prohibition of event contracts involving gaming. 17 C.F.R. § 40.11(a)(1). The CFTC explained that its “prohibition of certain ‘gaming’ contracts is consistent with Congress’s intent to ‘prevent gambling through the futures markets’ and to ‘protect the public interest from gaming and other events contracts.’” Provisions Common to Registered Entities, 76 Fed. Reg.44776, 44786 (Jul. 27, 2011) (footnotes omitted). Thus, the CFTC recognized that the Special Rule reinforced Congress’s existing policy against sports betting. Kalshi even acknowledged this fact in a brief filed with the D.C. Circuit 14 months ago (and mere weeks before launching its nationwide sports betting app). See Appellee Br. at 41,
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Case 3:26-cv-00034 Document 40-1 Filed 01/23/26 Page 10 of 22 PageID #: 447
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